Many Japanese and European Data Releases

Daily Forex Fundamentals | Written by CurrencyThoughts | Nov 28 08 12:42 GMT |

Currency movements reflect a little less risk tolerance. The yen firmed 0.2% against the dollar, which otherwise posted gains of 0.5% against the euro and Swiss franc, 0.4% relative to the Canadian dollar, 0.3% against sterling, 0.2% against the kiwi and 0.1% against the Australian dollar. In Asia, the Nikkei advanced 1.7%. Stocks also rose 2.5% in Hong Kong, 3.1% in Thailand, 3.3% in Indonesia, 1.3% in Singapore and 1.2% in South Korea. Australian equities recovered another 4.3%. In Europe, the German Dax and Paris Cac are down 1.0%. Swedish stocks lost 1.7%. The yield on 10-year JGB's rose 2.5 basis points to 1.40%, but bund and gilt yields are lower. Oil is 1.8% lower at $53.46/barrel as oil ministers talk things over in Cairo. Gold edged 0.1% higher to $815/ounce. Mumbai death toll above 140 people, but markets not affected by the terrorism. Released Japanese data showed the Shoko Chukin index of small business sentiment weaker than anticipated and at a 32+ year low of 35.1 in November after 37.6 in October 41.4 in August, and 43.1 last April; industrial production plunging 3.1% in October and projected to dive over 30% at a seasonally adjusted annual rate in 4Q08; large-store retail sales slumping 4.3% in the year to October; total retail sales dropping 0.6% y/y; real household spending falling 1.4% on-month and 3.8% on-year in October; jobs contracting 0.6% in the year to October; job offers sinking 18.1% from a year ago and the job offers:seekers ratio plumbing to a 4-year low; the unemployment rate unexpectedly to a 1-year low of 3.7% from 4.0% in September and 4.2% in August; stock and bond transactions generating a Y1842 billion capital outflow last week; housing starts rising 19.8% in the year to October, down from +54.2% y/y in September; and construction orders that were 47.2% greater than in October 2007. Japanese core (non-food) consumer price inflation eased to 1.9% y/y in October from 2.3% in September and 2.4% in August. Non-food, non-energy consumer prices were unchanged from six months earlier in Japan. Total Tokyo consumer prices dipped 0.4% saar in the six months to November, fanning worries of a return to deflation. Finally, the PMI-manufacturing index sank to 36.7 in November, lowest since at least 2001, from 42.2 in October and 47.0 in July. Euroland's preliminary CPI report revealed a bigger-than-assumed drop in inflation to 2.1% in November from 3.2% in October, 3.6% in September, 3.8% in August and a peak of 4.0% in July. Spanish inflation fell to a 15-year low of 2.4% from 3.6%. Italian inflation dropped to 2.8% from 3.6%. German inflation fell to 1.4% from 2.4%. The Euroland jobless rate rose for a second consecutive month, reaching 7.7% in October after 7.6% in September, 7.5% in July and August, 7.4% in June and May and 7.3% last April and in October 2007. Spanish unemployment climbed 0.7 percentage points between September and October to 12.8%. Irish joblessness rose half a percentage point in the month to 7.1%. Both of those economies are experiencing severe housing sector busts. The 3-month euribor rate slid 2.6 basis pints to 3.85%, a 21-month low. Italian producer prices sank 1.5% m/m in October and rose by a reduced year-on-year rate of 5.2% after 7.3% in September. French producer prices dropped more than twice as much as forecast, a decrease of 0.9% from September that cut on-year PPI inflation to 4.3%. Core French producer prices fell 0.4% m/m and rose just 2.8% y/y. French unemployment surpassed 2 million in October, rising 4.4% from a year earlier. Sweden became the latest European economy to be confirmed in recession, as real GDP slid 0.1% in both the second and third quarters of 2008. A drop of 0.6% in retail sales in October points to a steepening recession in the final quarter. The Riksbank will cut rates further on December 17th. Bulgaria's central bank cut reserve requirements. In Russia, key rates were hiked 100 bps but not until after a 1% drop in the rouble was engineered. Such was the second decline of 1% this week and the third since November 11th. The Swiss index of leading economic indicators swung below zero in November (-0.05) for the first time since mid-2003. Polish on-year growth slowed to 4.8% last quarter from 5.8% in 2Q and 6.7% in full-2007. Business investment firmed just 3.5% y/y, down from 15.5% in the first half of 2008. Malaysian growth slowed two percentage points to 4.7% in the year to 3Q08 from 6.7% in 2Q. South Korean industrial production posted a shocking 2.3% decline in October compared to an expected rise of more than 1%. The 12-month change swung to negative 2.4% from positive 6.2% in September. GDP in India climbed 7.6% in the year to 3Q versus a gain of 7.9% y/y in 2Q. Indian consumer prices rose 10.45% y/y in October, reflecting food costs. One of the Bank of Canada's top policymakers said more monetary stimulus is likely. The Finance Ministry believes a recession began in the current quarter. Britain's distributive trades index, a gauge of the retail sector, returned to August's low-point of -46 in November. A reading of -35 was anticipated. But consumer confidence bumped up to -35 in November from -36 in October and the low of -39 in August. South African credit growth edged down a tenth to 16.2% in November. Canadian producer prices and quarterly current account figures get released at 13:30 GMT. Larry Greenberg CurrencyThoughts

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Euro Loses the Most Amid Tight Trade

Daily Forex Fundamentals | Written by Crown Forex | Nov 28 08 12:38 GMT |

Currencies are still holding still in tight ranges of trade especially as Americans are still out the markets celebrating Thanksgiving. The euro though was the biggest loser amid those majors as it lost grounds against the US dollar on further signs of weakened economic activity in the Euro Area that pushed inflation rates strongly to the downside and pressures unemployment to rise. The euro continued the downside trend especially as still its trading below the 23.6% correction; the euro it trading still at it intraday lows against the dollar as the pair breached the 1.2850 to head to the 1.28 levels at the lower Bollinger Band over 4-hour basis and extending the decline might take the pair as low as 1.27 in the coming days. Sterling continues within the same range trading tightly around 38.2% correction the pair again did not manage to breach 1.5450; the downside is now supported by the 20 4-hour MA that the pair is trading at extending the decline might be seen below the set intraday low at 1.5340 yet with tight range of trade the 1.5280 might be the most to be seen. The USDJPY is still hovering tightly below the 95.60 and continues to be biased to the downside yet with low volume the pair might continue to fluctuate in a tight range and might be bard to extend below 95.0 levels where till now the pair managed to set the low closet at 95.13. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Global Fears Protect Yen

Daily Forex Fundamentals | Written by Investica | Nov 28 08 12:09 GMT |

The yen is liable to remain trapped between increased domestic fears and a major lack of confidence in the international economy. Heavy yen losses are unlikely in current circumstances. The dollar consolidated near 95.40 on Thursday with a rise in European bourses having a small negative impact on the yen. There was subdued trading with the US market closure dampening activity. The Japanese industrial data remained weak with a 3.1% decline in output for October and fears over the industrial sector are liable to intensify given the downturn in exports. There was also a decline in household spending while the consumer inflation rate slowed sharply. The unemployment rate fell to 3.7% from 4.0% the previous month, contrary to expectations of a rise, although this appeared to reflect discouraged workers leaving the workforce rather than firm demand for labour. The Nikkei index moved higher on hopes for further action by China to support the regional economy and the dollar was able to find support close to the 95 level. Fears over the global economy will still provide some degree of yen support. Investica http://www.investica.co.uk Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Nov 28 08 12:40 GMT |

USD-CHF @ 1.2093/97...S-H-S nearing confirmation R: 1.2131 / 1.2189 / 1.2300 S: 1.2010-1.1978 / 1.1924-1.1899 / 1.1849 Swiss has shot up significantly over the last couple of hours and is trading stronger attempting to break past the 8-SMA on the daily. If it manages to break past this level, we could see it rising further towards 1.22 or even 1.23 over the next few sessions. The S-H-S formation could be confirmed if the pair is able to break past 1.2120. We had profited out from the Long when the pair touched 1.2050 Inability to form the S-H-S could result in the pair falling towards 1.1960 GBP-USD @ 1.5338/41...Trading lower R: 1.5402 / 1.5436 / 1.5516 S: 1.5170 / 1.5105 Cable has started showing weakness having broken the Support at 1.5366 and is now testing the 21-day MA. A break below, the pair could slip towards 1.5170 during the US session or a rise could find Resistance at 1.55 Close above 1.5150 during the US session could be a good indicator for the pair as the Long Term Support may hold. AUD-USD @ 0.6540/43...Resistance at 0.66 held R: 0.6617 / 0.6680 / 0.6859 S: 0.6543-34 / 0.6509 / 0.6463-35 Aussie continues to trade in a very thin range between 0.6546 and 0.6600 during the early European session today. It is currently testing the Support at 13-SMA on the 4-hourly at 0.6542. As mentioned in the morning, the Resistance at 0.66 held and the pair dipped from there. If the same continues even during the US session, the pair could be pressured further down towards 0.6435 or if it is able to break the Resistance at 0.66, we could see the pair move up towards 0.68 over the next few trading sessions. Kshitij Consultancy Service http://www.fxthoughts.com Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Today's Market Outlook

Daily Forex Technicals | Written by Windsor Brokers Ltd | Nov 28 08 12:47 GMT |

EURUSD Remains constructive off 1.2422, 21 Nov higher low, to extend gains to 1.3080 on 25 Nov, shy of 1.3117, 05 Nov high. Failure to break higher sparked reversal to 1.2820 on 26 Nov, with consolidation within 1.2860/1.2967 followed. Attempt lower is now under way, attempting at 1.2860, break of which opens 1.4820 retest, break of which will turn short-term focus bearish for 1.2751, 50% retracement of 1.2422/1.3080 upleg. Upside, reclaim of 1.2967 is needed to keep short-term bulls in play for fresh attempt towards 1.3080/1.3100, 25 Nov high/trendline resistance. Res: 1.2956, 1.2967, 1.3027, 1.3080 Sup: 1.2820, 1.2805, 1.2751, 1.2675 GBPUSD Downtrend from July's 2.0154 peak reached 1.4556 on 13 Nov, ahead of recovery. This reached 1.5532 high on 25 Nov, followed by current correction/consolidation. Short-term outlook remains supportive for fresh attempt higher, with break through 1.5532 required to open 1.5600/1.5701, 50% retracement of 1.6669/1.4556 down-leg/ 11 Nov intraday high next. Downside, loss of 1.4982, 25 Sep higher low, will end bullish bias. Res: 1.5468, 1.5511, 1.5532, 1.5575 Sup: 1.5342, 1.5310, 1.5265, 1.5174 USDJPY Upside failure at 97.44 on 25 Nov, extended losses to 94.60 on 26 Nov, ahead of consolidation within 94.99/95.60 band. Short-term tone is biased for 94.60 retest, break of which would see further extension towards 94.25, key trendline support, while only regain of 95.60 improves the outlook and brings 97.44 retest back in focus. Res: 95.56, 95.75, 96.08, 96.35 Sup: 94.99, 94.60, 94.44, 94.25 USDCHF Bounced off 1.1830, 25 Nov low, to reach 1.2076 on 26 Nov, before easing. Higher platform is now in place at 1.1953/59, 27 Nov/today's lows, underpinning current attempt towards 1.2076, break of which will expose 1.2120/70, possibly 1.2222/53 on a break. Losing 1.1953, however, will weaken the tone and revive bears. Res: 1.2076, 1.2100, 1.2120, 1.2170 Sup: 1.2000, 1.1953, 1.1930, 1.1900 Windsor Brokers Ltd http://www.windsorbrokers.biz The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

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Eurozone November Consumer Prices Estimate: Summary (Table)

By Kristian Siedenburg

Nov. 28 (Bloomberg) -- Following is the MUICP inflation flash estimate from Eurostat in Luxembourg:

=============================================================================
               Nov.   Oct.   Sept.  Aug.   July   June   May    April  March
               2008   2008   2008   2008   2008   2008   2008   2008   2008
=============================================================================
YoY Estimate    2.1%   3.2%   3.6%   3.8%   4.1%   4.0%   3.6%   3.3%   3.5%
Actual result    n/a   3.2%   3.6%   3.8%   4.0%   4.0%   3.7%   3.3%   3.6%
=============================================================================
NOTE: The eurozone inflation is measured by the Monetary Union
Index of Consumer Prices (MUICP). To compute the MUICP
flash estimates, Eurostat uses early price information relating
to the reference month from Member States for which data are
available as well as early information about energy prices.

The estimation procedure for the MUICP flash estimate issued
today combines historical information with partial information
on price developments in the most recent months to give a total
index for the eurozone. No detailed breakdown is available.

SOURCE: Eurostat

To contact the reporter on this story: Kristian Siedenburg at ksiedenburg@bloomberg.net

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German Parliament Passes 2009 Budget, Backs Higher Borrowing

By Rainer Buergin

Nov. 28 (Bloomberg) -- Germany’s lower house of parliament, the Bundestag, authorized a federal budget for 2009 that will rely more on new borrowing than originally intended after the economic outlook for next year worsened.

To help finance spending of 290 billion euros ($372.5 billion), the government plans to borrow 18.5 billion euros, 8 billion euros more than projected previously. Planned tax revenue was lowered by 4.6 billion euros from the draft budget adopted by the cabinet in June.

As tax revenue falters, Finance Minister Peer Steinbrueck has to sell more bonds to pay for economic stimulus measures agreed on by Chancellor Angela Merkel‘s Cabinet. The borrowing plan may become obsolete as the recession deepens and Merkel and Steinbrueck face pressure to pump more money into the economy before national elections in September.

“This is purely an election-year budget,” Otto Fricke, a member of the opposition pro-business Free Democratic Party and chairman of the Bundestag’s budget committee, said in a debate before today’s vote, which the government won by 388 to 138. “You’re building castles in the air, you’re ignoring reality.”

The government has been forced to compromise its budget after drawing up a 50 billion-euro stimulus package and signing off on a 500 billion-euro bank rescue plan, equivalent to a fifth of gross domestic product. The stimulus package, which includes expected investment by industry, will be spread over four fiscal years from 2009.

‘Dramatic’ Situation

Germany’s economic situation is “dramatic,” Economy Minister Michael Glos said in today’s Bundestag debate. A period of slow growth may “punch tremendous holes in public finances,” he said, at the same repeating his call for cuts to spur the economy.

German business confidence slumped to the lowest level in almost 16 years in November, the Munich-based Ifo institute said Nov. 24. Its confidence index, based on a survey of 7,000 executives, dropped to 85.8, the lowest since February 1993, from 90.2 in October.

Carmakers Volkswagen AG and Porsche SE said on Nov. 25 that they’ll suspend production at their hometown plants in coming weeks. VW will shutter its factory in Wolfsburg from Dec. 18 to Jan. 11 and Porsche will halt output in Stuttgart for seven days between now and the end of January.

Germany, which balanced public-sector income and outlays last year for the first time since 1969, is still better off than many of its European Union counterparts. Six EU members, including the U.K. and Ireland, will infringe the bloc’s deficit rules in 2009, the European Commission forecast on Nov. 3. Germany is not among them.

Germany retained a “stable” outlook at Moody’s Investors Service on its Aaa government bond ratings, even though the financial crisis is straining the budget, the rating company said Nov. 24.

“Germany’s public debt payment capacity is strong and Moody’s anticipates no problems with regard to affordability or adverse debt dynamics, even with the impact of the economic slowdown likely to be felt on both sides of the government balance sheet,” said Moody’s analyst Alexander Kockerbeck.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.

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Retailers Open Early With Discounts on ‘Black Friday’

By Amy Eagleburger and Timothy R. Homan

Nov. 28 (Bloomberg) -- U.S. retailers opened their doors at midnight and discounted merchandise as much as 70 percent on the day after Thanksgiving to counter what may be the weakest holiday shopping season in six years.

Individuals may spend an average of $616 on holiday gifts this year, down 29 percent from a year earlier, according to a Gallup Inc. poll. That raises the pressure on chains facing declining consumer confidence and the prospect of a recession.

“We’re out to save money,” said 62-year-old Jeanne Molloy, who was taking a bus from New York City to Woodbury Common Premium Outlets in Central Valley, New York, with a friend and an empty suitcase yesterday. “The economy is bad.”

Retailers promoted “doorbuster” deals to attract customers on the day traditionally called “Black Friday.” The day after Thanksgiving was said to be when retailers started to make their annual profits, having paid off their costs from sales earlier in the year.

“The consumer is programmed to buy right now,” Gilbert Harrison, chairman and chief executive officer of New York-based investment bank Financo Inc., said in a Bloomberg Television interview. “They see bargains like they’ve never seen before.”

Best Buy Co., the country’s biggest electronics retailer, opened its stores at 5 a.m. It advertised a Toshiba Corp. satellite laptop computer for $379.99, which was a $270 discount.

At the Fort Henry Mall in Kingsport, Tennessee, about 150 people milled around at 4:45 a.m., waiting for the opening of Belks Inc. and J.C. Penney Co. stores offering “doorbuster” specials on sweaters, binoculars, and luggage.

Family Priorities

Brenda Little, 42, said she was disappointed at the sales this year and said the only reason she was out at the crack of dawn was for her 14-year-old daughter, Marie, who combed the mall in search of a cheap iPod and snow boots.

Her family is cutting back their Christmas budget because of the economy, drawing names with in-laws to buy a single gift for one person rather than smaller items for everybody, Little said.

Her husband, a contractor, has survived one round of layoffs at his company, Little said. While his job is safe for now, “you still have to watch it down the road in case just after Christmas that does happen,” she said.

November and December sales at stores open at least a year may rise 1 percent, the smallest gain since 2002, according to the International Council of Shopping Centers, a New York-based trade group.

Discount Lures

Retailers used lower prices at earlier hours to win customers that were starting their holiday shopping with less than four weeks before Christmas.

Kohl’s Corp., the fourth-largest U.S. department store, opened at 4 a.m. Wal-Mart Stores Inc. and Macy’s Inc. had a 5 a.m. start.

Retail stocks have tumbled this year along with the U.S. economy. The Standard & Poor’s 500 Retailing Index was down 35 percent before today.

Wal-Mart, based in Bentonville, Arkansas, has bucked the trend, with its emphasis on low prices winning customers during the economic slump. The retailer is the only Dow Jones Industrial Average company to have risen this year. It’s gained 19 percent, while the 30-member index has tumbled 34 percent.

Black Friday discounts pulled in consumers who have felt the pinch of the economic slump and the higher fuel prices earlier this year.

‘Best Time’

“This is the best time to do it,” said Michael Strange, 41, of Washington, who lost his job earlier this year before taking a position as a transportation worker for the city.

Strange began waiting in line at a Best Buy at 1 p.m. yesterday to buy a 42-inch flat-screen television. He planned to visit a Target Corp. store afterwards to buy gifts for his two boys and intends to buy all his holiday gifts today.

“I’m shopping for the whole house,” he said.

Fitness personality Richard Simmons, wearing red-and-white- striped very short shorts, sneakers and a red muscle shirt with fluffy white Santa trim, bounced around the outside of Macy’s in New York’s Herald Square early this morning, where crowds mobbed every entrance in advance of its opening.

Richard Feijoo, 21, and his twin brother Jesus from Brooklyn were waiting at the front of the line at Herald Square and were shopping for themselves.

‘Low Prices’

“It’s low prices, a good store and it’s Black Friday, so we’re here early,” Richard said. “Jeans, Levi’s, only clothes. I go shopping at Macy’s in Brooklyn so I know exactly what I’m looking for.

“This is all about me here right now. Today we get to be selfish a little bit,” said Richard, who said his Christmas gift budget is a bit less than last year.

There were 5,000 people waiting to get in, Macy’s Chief Executive Officer Terry Lundgren said in a Bloomberg Television interview.

“A lot of folks are walking out with bags,” Lundgren said. “We got them in with great values, and what I really hoped is that they will spend more of whatever they’re going to spend at Macy’s, even if it’s less than last year.”

A drop in consumer spending in October and weakening U.S. business investment signal that the U.S. economy may sink further in coming months.

Spending Declines

Americans cut spending by 1 percent last month, the biggest decline since the 2001 recession. After adjusting for inflation, spending was down for the fifth straight month, the longest streak since 1990-1991, according to Commerce Department data.

That’s evidenced by people competing for bargains in front of stores this holiday season.

“There is no fun in this,” said Angel Croll, a single mom with two children, who arrived at a Kohl’s store in Greensboro, North Carolina, 55 minutes before it opened at 4 a.m.

More than 400 people lined up behind the 33-year-old auditor, who planned to buy two knife sets regularly priced at $99.99 each for $29.99.

Next she headed to a Dick’s Sporting Goods Inc. store for three coats marked half off at $39.99 and then to Wal-Mart for clothes, toys and a $69 Samsung digital camera. She plans to spend $400 to $500 on Christmas gifts, down from $600 last year.

“My children would not be able to get half of what I’m getting them without Black Friday,” Croll said.

To contact the reporter on this story: Amy Eagleburger in New York aeagleburger@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net

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U.K. November Retail Sales Index Matches 25-Year Low, CBI Says

By Svenja O'Donnell and Jennifer Ryan

Nov. 28 (Bloomberg) -- A U.K. retail sales index matched a 25-year low in November as the recession prompted consumers to shun stores, the Confederation of British Industry said.

The survey of retailers showed 16 percent reporting higher sales and 62 percent showing a drop. The balance of minus 46 matched that for August, which was the lowest since the survey began in 1983, the biggest U.K. business lobby said today.

Consumer spending dropped the most since 1995 in the third quarter and U.K. house prices fell for a 13th month in November, data released this week showed. Chancellor of the Exchequer Alistair Darling has pledged a cut in sales tax to get Britons shopping and help prevent the recession from deepening.

``Christmas is going to be extremely tough this year, with retailers having to work harder than ever to keep the tills ringing,'' Andy Clarke, chairman of the CBI's survey panel and retail director at Wal-Mart Stores Inc.'s Asda store chain, said in a statement. ``Consumer durables, furniture, carpets and DIY are really being hit, and with a thawing of the housing market remote, this is unlikely to change.''

Motor traders endured ``sharply falling'' sales for a fifth month, with a net balance of 86 percent reporting a drop from a year earlier, the CBI said. For December, 98 percent of them anticipate lower sales, the report showed.

The survey of 185 retailers, which hasn't shown a positive balance since March, was conducted between Oct. 28 and Nov. 12, the CBI said.

Woolworths, MFI

Woolworths Group Plc placed its stores in administration this week and MFI Retail Ltd., a 44-year-old furniture retailer, collapsed. The filings have put almost 30,000 U.K. jobs at risk.

Darling's pledge to cut value-added tax to 15 percent from 17.5 percent is part of the nation's biggest fiscal stimulus since 1988 to shore up the economy, with measures that will push the government budget deficit to 118 billion pounds ($182 billion) next year.

The U.K. economy may contract by 1.1 percent next year, the most since 1991, easing inflation pressures in the economy and giving the central bank room to cut the key interest rate 1 percentage point from the current 3 percent in the first half of 2009, the Organization for Economic Cooperation and Development said Nov. 25.

To contact the reporters on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net; Jennifer Ryan in London at Jryan13@bloomberg.net.

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U.K. Consumer Confidence Stayed Weak in November

By Svenja O'Donnell

Nov. 28 (Bloomberg) -- U.K. consumer confidence stayed close to the lowest level in more than three decades in November as gloom about the recession deterred spending, GfK NOP said.

An index of sentiment, based on a survey of 2,000 people between Nov. 7 and Nov. 16, rose one point from the previous month to minus 35. A gauge measuring the general economic situation in the past year rose one point to minus 71, still 39 points lower than in the same month last year.

Bank of England policy maker Timothy Besley said yesterday that the ``big issue'' for the British economy is to get banks to lend again. The seizure in credit markets and worsening prospects for economic growth has led consumer spending to drop and prompted the central bank to cut the benchmark interest rate this month to 3 percent, the lowest since 1955.

``U.K. consumers are still being battered by news about our poor economy in general and mounting concerns about job losses in particular,'' Rachael Joy, a spokeswoman for GfK, said in a statement. ``The dramatic cut in interest rates this month appears to have done little to improve sentiment so far, as U.K. consumers continue to fret over the impact of a looming recession.''

An index measuring Britons' personal financial situation in the next year rose two points to minus 10, GfK said. Expectations for the general economic situation over the next 12 months rose one point to minus 36.

Retail Sales

A U.K. index of retail sales matched the lowest in at least 25 years in November as consumers shunned stores, the Confederation of British Industry said today. The monthly survey of 185 retailers showed a net 46 percent of them reported lower sales volumes.

U.K. house prices fell for a 13th month in November as the financial crisis deterred homebuyers and banks rationed mortgages, Nationwide Building Society said yesterday. Home values, based on transaction data, dropped 10.1 percent from a year earlier in October, the biggest decline since at least 1996, the government's Land Registry said today.

Besley said that valuation models showed that house prices were ``too high.'' Consumers need to pay down debt and save more as the economy rebalances, he said.

Consumer Spending

Prime Minister Gordon Brown this week urged banks to free up credit as political pressure mounts for measures to force them to lend. U.K. consumer spending dropped the most since 1995 in the third quarter as gross domestic product contracted 0.5 percent, the Office for National Statistics said on Nov. 26. Unemployment jumped the most in 16 years last month.

U.K. consumers' expectations on inflation dropped to the lowest since at least 2005 in November as the recession intensified, a survey for Citigroup Inc. showed today. The median prediction for price increases in the coming 12 months fell to 0.9 percent from 2.9 percent in October, according to the survey by YouGov Plc.

Citigroup economist Michael Saunders predicted the Bank of England will lower its benchmark interest rate at the next decision on Dec. 4 by 1 percentage point to the lowest level since 1951.

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.

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Italy Unveils EU80 Billion Plan to Boost Economy

By Lorenzo Totaro

Nov. 28 (Bloomberg) -- Italy unveiled an 80 billion-euro ($102 billion) economic-stimulus plan that includes cash payments to low-income families, mortgage relief and stepped up public works spending.

“Today with this plan there are 80 billion euros of resources that will pass from the public accounts to the private economy,” Prime Minister Silvio Berlusconi said after a Cabinet meeting in Rome to pass the measures.

The plan will include more than 16 billion euros of public works spending that will be approved next week, Berlusconi said. Italy will distribute about 2.4 billion euros in one-off cash payments to the country’s poorest families from Jan. 1. The government will force banks to limit rates charged on variable rate mortgages, while agreeing to underwrite new bonds to allow them to increase their capital levels.

Today’s measures are part of a European Union effort to counter the impact of worldwide financial turmoil that has shut down access to funding, roiled stock markets and sent household and corporate confidence into a tailspin. The EU on Nov. 26 announced a 200 billion-euro stimulus plan after the euro-area economy slipped into its first recession since the start of the single currency.

Italian Recession

Italy’s economy, the euro region’s third biggest, also fell into recession in the third quarter, and the International Monetary Fund forecast this month that the country’s gross domestic product will contract this year and next, boosting unemployment and the budget deficit.

The package of measures includes unspecified corporate tax breaks, a delay in payments of value-added taxes and quicker reimbursement of excess tax payments, Finance Minister Giulio Tremonti said.

To ease consumers’ pain the government will make payments to the poorest Italian families of as much as 1,000 euros. Toll rates on Italian highways will be frozen at current levels for the first six months of 2009.

Banks will be forced to link new variable-rate mortgages to the European Central Bank’s benchmark rate, rather than the current practice of tying them to floating, money-market rates, which have surged during the credit crisis. The government will also cap existing variable mortgages at 4 percent and reimburse homeowners the difference if their banks charge more.

Money Market Rates

Most banks in Italy link their variable-rate mortgages to the three-month or six-month Euribor rate, charging a premium of between 0.6 percent and 2 percent, said Massimiliano Romano, a banking analyst at Concentric Italy in Milan.

“This measure will likely have a time limit, it’s not something you can keep up indefinitely,” Romano said. “I would think banks will get something in return so I’d be curious to see what the terms of the agreement between the government and banks are.”

Berlusconi said that even with the economic slowdown and increased spending, the government would stick to its pledge to reduce Italy’s debt, the highest in the EU at 104 percent of GDP, to less than 100 percent in 2011.

To contact the reporter on this story: Lorenzo Totaro at in Rome or ltotaro@bloomberg.net

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Swedish Economy in Recession on Global Credit Crisis

By Johan Carlstrom

Nov. 28 (Bloomberg) -- Sweden’s economy slid into recession in the third quarter as the global financial crisis hurt demand for exports and consumers spent less, indicating that the central bank will cut rates by more than it has forecast.

Seasonally adjusted gross domestic product contracted 0.1 percent from the previous three months, when it also shrank a revised 0.1 percent, Statistics Sweden said. The median forecast of 11 economists surveyed by Bloomberg was for a decline of 0.2 percent. From a year ago, GDP was unchanged.

“We’re facing a really cold winter,” Finance Minister Anders Borg told reporters in Stockholm today. “It will be long, it will be cold, it will be bitter.”

Sweden’s economy joins the 15-nation euro region in recession as lending seizes up worldwide. Slower growth may prompt the central bank, or Riksbank, to cut to its key lending rate by more than the half-point over six months that it forecast in October. The bank based its prediction on annual growth of 0.8 percent in the third quarter.

“The decline has been very abrupt,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London. “There seems to be more or less a collapse of private consumption, one of the main growth drivers in past years, so it looks like the Riksbank will have to cut aggressively going forward.”

The krona fell 0.4 percent to 10.3172 against the euro by 1:24 p.m. in Stockholm. The yield on the 5.25 percent government bond due March 2011 fell 13 basis points to 2.16 percent. A basis point is 0.01 of a percentage point.

Doing More

The government is evaluating whether it can do more to cushion the economic slowdown, Borg said. “We need to look over what further measures we need to take.” The government will prioritize measures that contribute to long-term growth, he said.

Parliament has already approved plans to boost spending by one percent of GDP in 2009. Measures include cutting income taxes for a third time since gaining power in 2006. The government also plans to reduce payroll and corporate taxes and increase spending on infrastructure, education and welfare.

“The government needs to do more to prevent this downward spiral continuing,” said Leif Pagrotsky, a member of the Social Democrats opposition party and vice-chairman of the central bank’s general council, told reporters in Stockholm.

Regional Woes

Economic growth in Nordic neighbors Norway and Denmark is also faltering. Sweden will fail to expand next year after growing 0.8 percent in 2008, while Norway’s growth rate will drop by more than half to 1.2 percent from 2.9 percent, the Organization for Economic Cooperation and Development said on Nov. 25. Denmark will contract 0.5 percent next year after growing 0.2 percent in 2008, the OECD said.

Swedish retail sales fell in October from the year earlier for the second consecutive month, the first back-to-back declines in 12 years, according to figures published by Stockholm-based Statistics Sweden today.

“The retail sales figures were very, very weak and an indication of how bad the fourth quarter will be,” Gullberg said. Consumer retail purchases dropped 0.7 percent in October from a year earlier, the statistics office said.

The Riksbank will cut the benchmark rate by a 0.75 percentage points to 3 percent when its meets on Dec. 16, said Olle Holmgren, an economist at SEB AB. By the summer, the rate will be 1.5 percent or less, he said. The Swedish economy, adjusted for working days, will contracts 1.3 percent in 2009, SEB forecasts.

Several companies such as truck maker Volvo AB, construction company Skanska AB and Sandvik AB, the world’s largest maker of cutting tools, have announced that they will fire staff.

Manufacturing confidence fell to its lowest level in at least 12 years in November and consumer confidence was little changed near a 15-year low, indicating the economy may continue to slow in the fourth quarter.

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.

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India’s Economy Will Likely Withstand Terror Attacks

By Cherian Thomas

Nov. 28 (Bloomberg) -- India’s economy will probably withstand the effect of yesterday’s terror attacks in Mumbai as rising incomes and record harvests boost consumer spending.

“Mumbai is no stranger” to terrorism, said Sarah Hewin, an economist at Standard Chartered Bank in London. “Each time we have seen a bounce-back and this time will be no exception.”

Finance Minister Palaniappan Chidambaram, who expects India’s growth to rebound to 9 percent from as low as 7 percent this year even as a global recession spreads, today said the economy will “overcome” the impact of shootings and blasts in the nation’s business capital. Asia’s third-largest economy expanded more than expected last quarter as consumer spending held up and investments increased, a report showed today.

“Things changed starting October, when monetary policy shifted to a softening stance that will continue until the middle of next year,” said Mridul Saggar, chief economist at Kotak Securities Ltd. in Mumbai. “The fundamentals of the economy are positive.”

Governor Duvvuri Subbarao has reduced the central bank’s repurchase rate twice in the past five weeks, lowering it to 7.5 percent from a seven-year high of 9 percent. The Reserve Bank of India has been given room to cut borrowing costs as weaker commodity prices reduce risks from inflation, now at a six-month low of 8.84 percent.

‘Bounce Back’

Chidambaram expects growth in India’s $1.2 trillion economy to slow to between 7 percent and 8 percent in the year to March 31. He says it will “bounce back” on the strength of domestic consumption and investment. Chidambaram said even at 7 percent, India’s growth is three times the rate of global expansion and is second only to China.

Gross domestic product expanded 7.6 percent in the three months to Sept. 30 from a year earlier, faster than the 7.2 percent forecast by analysts, according to a statement by the statistics department in New Delhi today.

Domestic consumption in the country of 1.2 billion people, which averaged 59 percent of the economy in the past year, held up at 58 percent last quarter. Local consumption accounts for 37 percent of GDP in China. Savings make up 30 percent of India’s economy, compared with 1 percent of GDP in the U.S.

Rural Incomes

“There is a lot of money to be reinvested back into the economy,” said Jai Sinha, partner and co-head for India at Booz & Co., a global management consulting firm. “There is no doom and gloom over India.”

Investments rose to 35.3 percent of India’s GDP last quarter from 32.3 percent in the previous quarter, according to today’s statement.

Record crop plantings by India’s 400 million farmers will also boost rural incomes in the year ahead and help spur growth, Chidambaram said Nov. 18.

Indian and overseas companies said they aren’t changing their business plans after terrorists attacked luxury hotels, a railway station and a hospital in Mumbai. The encounter, which targeted American and Britons, left as many as 124 dead.

Targeting foreign nationals at key tourist hotels and restaurants adds a new dimension to a wave of bombings in India this year that has killed more than 300 people.

“The events of the last 24 hours have not affected our longer term business plans in the country,” said Alice Hunt, director for corporate media at GlaxoSmithKline Plc, Europe’s largest drugmaker, which is looking at India to boost sales.

Slower Inflation

Jan Lambregts, head of Asia research at Rabobank International, a subsidiary of the Dutch banking group, said India’s “domestic demand component could show some resilience because inflation is coming off.” He forecast economic growth at about 7 percent in 2009, “which is quite decent given that it’s a very tough year next year.”

“In the short term there will be a shock, but in the medium term the investor confidence will come back,” said Venu Srinivasan, chairman of TVS Motor Co., India’s third-largest motorcycle maker. “India’s long-term growth story is intact.”

India will “go after” individuals and organizations behind the Mumbai terrorist attacks, which were “well-planned with external linkages,” Prime Minister Manmohan Singh said in a televised address to the nation.

India’s stock and bond markets, which were shut yesterday, advanced today. The key Sensitive index erased declines, rising 0.7 percent to 9092.72 at close of trading on the Bombay Stock Exchange, while the 10-year government bond yield fell 3 basis points to 7.07 percent. The rupee fell 1.4 percent to 50.1050 per dollar.

Any decline in Indian financial markets in response to the terror attacks may prove to be “temporary” as borne out by Mumbai’s experience since 1993, Moody’s Economy.com said.

The benchmark Sensitive index rose 3 percent the day after train bombings in Mumbai in July 2006 that killed 187 people and injured more than 800.

“This sort of incident is not new in India,” said Templeton Asset Management Ltd. Chairman Mark Mobius, who oversees more than $24 billion in emerging-market stocks. “Life does go on in India. It’s a very vibrant economy.”

To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net.

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Europe Inflation Rate Drops Most in Almost 20 Years

By Fergal O’Brien

Nov. 28 (Bloomberg) -- Europe’s inflation rate fell by the most in almost two decades and unemployment increased, adding to pressure on the European Central Bank to continue cutting interest rates to battle the recession.

Inflation in the euro area slowed to 2.1 percent in November from 3.2 percent in October, the European Union’s statistics office in Luxembourg said today. The drop is the biggest since at least 1991 and puts the inflation rate at the lowest in more than a year.

The Frankfurt-based ECB has already cut its benchmark rate by 100 basis points in two moves since early October, part of a wave of reductions by central banks around the globe as they combat the worst financial crisis since the Great Depression. The drop this month brings euro-area inflation close to the ECB limit of just under 2 percent, which it has exceeded every month since September 2007.

It “gives the ECB more room to maneuver,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt, who expects a 75 basis-point reduction next week to 2.5 percent. “And the rate cut process will continue.”

Economists had forecast that inflation would ease to 2.4 percent in November, based on the median of 34 estimates in a Bloomberg News survey. The statistics office will publish a breakdown of the inflation numbers next month.

15-Year Low

A separate report today showed the euro-region unemployment rate rose to 7.7 percent in October from 7.6 percent in September, the highest level since January 2007. That follows data yesterday that showed European economic confidence dropped to a 15-year low in November, while retail sales fell the most in at least five years.

The euro fell 1.3 percent to $1.2732 as 1:22 p.m. in London and European government bonds rose. The yield on Germany’s 10-year bund, Europe’s benchmark, declined 4 basis points to 3.23 percent, taking its drop in November to 66 basis points.

ECB President Jean-Claude Trichet said in a newspaper interview this week that there may be “negative growth” next year. EU Monetary Affairs Commissioner Joaquin Almunia has also said he sees the euro-area economy shrinking in 2009.

Oil Prices

Oil prices have dropped by almost two-thirds since reaching a record close to $150 a barrel in July. Crude oil was at $53.67 today, down 21 percent this month alone.

Investors expect the ECB to lower the benchmark rate by at least 75 basis points at a Dec. 4 meeting from the current 3.25 percent, Eonia forward contracts show. While economists at Fortis Bank and Bank of America all expect to see the ECB reduce the rate by 75 basis points to 2.5 percent, most are sticking to their forecast for a 50 basis-point reduction, according to a survey by Bloomberg News. The median of 53 forecasts is for a cut to 2.75 percent.

A 75 basis-point reduction would take the ECB rate to the lowest since May 2006. The ECB has never cut its key rate by more than 50 basis points since it was founded in 1999 and some council members indicated that they don’t favor larger rate cuts. Austria’s Ewald Nowotny said this week that the ECB should keep some “firepower” in reserve.

Data point “to a further deterioration in economic activity in late 2008,” said Gilles Moec, an economist at Bank of America in London. “Since inflation is also receding faster than anticipated, there is a clear case for a ‘higher-than-usual rate cut’ on Dec. 4 by the ECB.”

To contact the reporter on this story: Fergal O’Brien in Dublin at fobrien@bloomberg.net.

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Nigeria LNG Declares Force Majeure as Soku Plant Shut

By Dulue Mbachu

Nov. 28 (Bloomberg) -- Nigeria LNG Ltd. declared force majeure on cargo deliveries after Shell Petroleum Development Co. shut the Soku gas plant in the southern delta to repair damage caused by thieves.

Shell’s Soku facility contributes 40 percent of Nigeria LNG’s feedstock, Siene Allwell-Brown, a spokeswoman for the liquefied natural gas company, said yesterday in a statement. The thieves had been stealing gas condensate from pipelines.

“Nigeria is a major gas supplier in the world, so any disruptions must be fairly serious” Antony Goldman, an independent analyst focusing on Nigeria, said by telephone from London. Work to tap the “ample” reserves is hampered by unrest in the delta region, which holds almost all the country’s hydrocarbon resources, he said.

Oil and gas producers in Nigeria have in recent years faced militant attacks and thefts from criminal gangs who tap into pipelines to steal crude or refined petroleum products for sale. Assaults by armed groups have cut more than 20 percent of the country’s oil exports since 2006.

When attacks and thefts disrupt output, companies have been forced to declare force majeure, a legal clause that allows them to renege on contractual obligations because of circumstances beyond their control.

‘Social Crisis’

“Increasingly, as far as the oil industry in Nigeria is concerned, it is a multilayered social crisis,” Goldman said.

The Soku plant is part of a joint venture operated by Shell Petroleum Development, Royal Dutch Shell Plc’s Nigerian unit, in which state-owned Nigerian National Petroleum Corp. holds a 55 percent stake. Shell has 30 percent, followed by Total SA with 10 percent and Eni SpA with 5 percent.

The partners are also part-owners of Nigeria LNG, which runs the multibillion-dollar Bonny LNG plant and has long-term contracts with buyers in Italy, Spain, Turkey, Portugal and France.

The plant can produce 22 million metric tons of LNG and four million tons of liquefied petroleum gas a year, using 3.5 billion cubic feet of gas a day at full output, according to the company’s Web site. In addition to its long-term supply contracts, Nigeria LNG also sells on the spot market.

Nigeria’s gas resources, estimated at 187 trillion cubic feet, are the seventh largest in the world.

Nigerian National Petroleum owns 49 percent of Nigeria LNG, Shell has a 25.6 percent stake, Total holds 15 percent and Eni 10.4 percent. Apart from Shell, Total and Eni also supply gas from their Nigerian operations to the Bonny gas plant.

To contact the reporter on this story: Dulue Mbachu in Lagos at dmbachu@bloomberg.net

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India’s Economy Will Likely Withstand Terror Attacks

By Cherian Thomas

Nov. 28 (Bloomberg) -- India’s economy will probably withstand the effect of yesterday’s terror attacks in Mumbai as rising incomes and record harvests boost consumer spending.

“Mumbai is no stranger” to terrorism, said Sarah Hewin, an economist at Standard Chartered Bank in London. “Each time we have seen a bounce-back and this time will be no exception.”

Finance Minister Palaniappan Chidambaram, who expects India’s growth to rebound to 9 percent from as low as 7 percent this year even as a global recession spreads, today said the economy will “overcome” the impact of shootings and blasts in the nation’s business capital. Asia’s third-largest economy expanded more than expected last quarter as consumer spending held up and investments increased, a report showed today.

“Things changed starting October, when monetary policy shifted to a softening stance that will continue until the middle of next year,” said Mridul Saggar, chief economist at Kotak Securities Ltd. in Mumbai. “The fundamentals of the economy are positive.”

Governor Duvvuri Subbarao has reduced the central bank’s repurchase rate twice in the past five weeks, lowering it to 7.5 percent from a seven-year high of 9 percent. The Reserve Bank of India has been given room to cut borrowing costs as weaker commodity prices reduce risks from inflation, now at a six-month low of 8.84 percent.

‘Bounce Back’

Chidambaram expects growth in India’s $1.2 trillion economy to slow to between 7 percent and 8 percent in the year to March 31. He says it will “bounce back” on the strength of domestic consumption and investment. Chidambaram said even at 7 percent, India’s growth is three times the rate of global expansion and is second only to China.

Gross domestic product expanded 7.6 percent in the three months to Sept. 30 from a year earlier, faster than the 7.2 percent forecast by analysts, according to a statement by the statistics department in New Delhi today.

Domestic consumption in the country of 1.2 billion people, which averaged 59 percent of the economy in the past year, held up at 58 percent last quarter. Local consumption accounts for 37 percent of GDP in China. Savings make up 30 percent of India’s economy, compared with 1 percent of GDP in the U.S.

Rural Incomes

“There is a lot of money to be reinvested back into the economy,” said Jai Sinha, partner and co-head for India at Booz & Co., a global management consulting firm. “There is no doom and gloom over India.”

Investments rose to 35.3 percent of India’s GDP last quarter from 32.3 percent in the previous quarter, according to today’s statement.

Record crop plantings by India’s 400 million farmers will also boost rural incomes in the year ahead and help spur growth, Chidambaram said Nov. 18.

Indian and overseas companies said they aren’t changing their business plans after terrorists attacked luxury hotels, a railway station and a hospital in Mumbai. The encounter, which targeted American and Britons, left as many as 124 dead.

Targeting foreign nationals at key tourist hotels and restaurants adds a new dimension to a wave of bombings in India this year that has killed more than 300 people.

“The events of the last 24 hours have not affected our longer term business plans in the country,” said Alice Hunt, director for corporate media at GlaxoSmithKline Plc, Europe’s largest drugmaker, which is looking at India to boost sales.

Slower Inflation

Jan Lambregts, head of Asia research at Rabobank International, a subsidiary of the Dutch banking group, said India’s “domestic demand component could show some resilience because inflation is coming off.” He forecast economic growth at about 7 percent in 2009, “which is quite decent given that it’s a very tough year next year.”

“In the short term there will be a shock, but in the medium term the investor confidence will come back,” said Venu Srinivasan, chairman of TVS Motor Co., India’s third-largest motorcycle maker. “India’s long-term growth story is intact.”

India will “go after” individuals and organizations behind the Mumbai terrorist attacks, which were “well-planned with external linkages,” Prime Minister Manmohan Singh said in a televised address to the nation.

India’s stock and bond markets, which were shut yesterday, advanced today. The key Sensitive index erased declines, rising 0.7 percent to 9092.72 at close of trading on the Bombay Stock Exchange, while the 10-year government bond yield fell 3 basis points to 7.07 percent. The rupee fell 1.4 percent to 50.1050 per dollar.

Any decline in Indian financial markets in response to the terror attacks may prove to be “temporary” as borne out by Mumbai’s experience since 1993, Moody’s Economy.com said.

The benchmark Sensitive index rose 3 percent the day after train bombings in Mumbai in July 2006 that killed 187 people and injured more than 800.

“This sort of incident is not new in India,” said Templeton Asset Management Ltd. Chairman Mark Mobius, who oversees more than $24 billion in emerging-market stocks. “Life does go on in India. It’s a very vibrant economy.”

To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net.

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OPEC May Delay Output Decision Until December Meeting

By Mahmoud Kassem and Maher Chmaytelli

Nov. 28 (Bloomberg) -- OPEC ministers, arriving in Cairo for a meeting tomorrow, said they may delay a decision on production levels until December as they assess the impact of their last supply cut amid falling demand.

“Now we are preparing the data and we will take the final decision in Algeria,” Iranian Oil Minister Gholamhossein Nozari said at his hotel in Cairo. Saudi Oil Minister Ali al-Naimi declined to speak as he arrived in Egypt today.

Qatari Oil Minister Abdullah bin Hamad al-Attiyah and Kuwaiti Oil Minister Mohammed al-Olaim also said the group would probably wait until its Dec. 17 conference in Oran, Algeria, before making a final decision. OPEC agreed last month to reduce production quotas by 1.5 million barrels a day.

The 13 members of the Organization of Petroleum Exporting Countries, which supply more than 40 percent of the world’s oil, are meeting for the third time in as many months to discuss a further cut in production after crude prices plunged more than 60 percent from July’s all-time high of $147.27 a barrel in New York.

“The market is very related to the global economic crisis,” al-Attiyah said after arriving at Cairo airport today. “There’s pressure on demand.”

Brent crude oil for January delivery rose 0.1 percent to $53.19 a barrel at 1:19 p.m. on London’s ICE Futures Europe exchange, after falling 1.5 percent yesterday when New York trading was shut.

Full OPEC Meeting

The Cairo meeting, originally intended just for ministers from Arab nations, was expanded into a full OPEC gathering including countries such as Venezuela, Iran and Angola.

“Presenting a moderate stance, but with a clear message that supply will be cut in Algeria, is the most likely outcome from the Cairo meeting,” Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York, said in a Nov. 25 research note.

“If OPEC producers agree to cut production, we will support it,” Venezuelan Oil Minister Rafael Ramirez said today in Cairo. Venezuela is “concerned” the oil market is oversupplied, he said, adding that “stocks are very high.”

Ramirez’s comments were echoed by United Arab Emirates Oil Minister Mohamed al-Hamli, who said the market is “certainly oversupplied,” and by Kuwait’s al-Olaim.

“There is a surplus on the market,” al-Olaim said today at Kuwait airport. “Everybody knows that. The decline in demand is there and it is a big amount” because of the slowdown in the global economy.

‘Firm, Reasonable Decision’

“At this meeting maybe we will not see a cut because we still need to see more information” on the market, which may not be available for another two weeks, he said. “We have to take a decision, a firm and reasonable decision, but we have to take it a little bit later.”

OPEC produced 32.18 million barrels of crude a day in October, according to Bloomberg estimates. The target output for 11 members with quotas is 27.3 million barrels a day in November. Last month, actual production from those 11 was 29.1 million barrels a day, according to Bloomberg data.

Economic reports this week showed a deepening recession in the U.S., the world’s largest oil user. Consumer spending slumped the most in seven years and orders for durable goods including refrigerators and washing machines declined twice as much as forecast, the Commerce Department said Nov. 26.

Eleven years ago, OPEC members bickered over quotas as oil prices slid 28 percent in 10 months amid the onset of the Asian financial crisis. At a meeting in Jakarta in November 1997, they raised quotas, even as economic turmoil in Asia was slowing demand and prices fell another 44 percent by December 1998 to a low of $10.35 in New York.

“We have seen this cycle before, just nine years ago the price was below $10,” al-Attiyah said today. “For the last 20 years this is a normal cycle, but we will come back.”

To contact the reporters on this story: Mahmoud Kassem in Cairo at mkassem1@bloomberg.net; Maher Chmaytelli in Cairo at mchmaytelli@bloomberg.net

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British Pound Weakens Against U.S. Dollar as Stocks Decline

By Anchalee Worrachate

Nov. 28 (Bloomberg) -- The pound fell against the dollar, paring its biggest weekly advance since January 2006, as stocks declined and reports added to evidence the global credit crisis is battering the British economy.

The U.K. currency also dropped versus the Japanese yen as the FTSE 100 Index slid for the second time in three days, a gauge of consumer confidence stayed close to a more-than-three- decade low and an index of retail sales matched the lowest level in at least 25 years. The pound rallied 2.7 percent versus the dollar this week as a rebound in stocks rekindled investor demand for higher-risk assets.

“The rebound in equity markets provided some support for sterling in the near term and I wouldn’t rule out it pressing higher in coming days,” said Ian Stannard, a foreign-exchange strategist at BNP Paribas SA in London. “Longer term though, I still believe sterling is vulnerable. We expect its recent rally to run out of steam in the middle of next week. The economic outlook will continue to weigh on the currency.”

The pound dropped to $1.5313 as of 12:47 p.m. in London, from $1.5406 yesterday and as high as $1.5448 earlier. It strengthened to 82.95 pence per euro, from 83.57 pence. The pound will fall to $1.4100 by year-end, BNP Paribas said.

The seizure in credit markets and an approaching recession have sapped consumer demand in Europe’s second-largest economy, prompting the Bank of England to cut borrowing costs four times this year from 5.50 percent. Policy makers this month reduced the key interest rate by 150 basis points to 3 percent, the lowest since 1955. The pound dropped 4.6 percent against both the dollar and the euro this month.

Gilts Rise

U.K. gilts rose today as investors sought the relative safety of government bonds, with two-year notes rose snapping four days of losses.

The gains pushed the yield eight basis points lower to 2.58 percent. The price of the 4.75 percent due March 2010 climbed 0.10, or 1 pound per 1,000-pound ($1,534) face amount, to 103.69. The yield on the 10-year note dropped three basis points to 3.76 percent. Yields move inversely to bond prices.

The “big issue” for the British economy is to get banks to lend again, Timothy Besley, a member of the Bank of England’s Monetary Policy Committee, said yesterday. The central bank’s next interest-rate decision is due on Dec. 4.

Policy makers will cut borrowing costs by at least another 75 basis points to 2.25 percent next week, according to a Credit Suisse Group AG index of probability based on overnight index- swap rates.

Gilts Versus Bunds

“If that’s the market consensus, then the two-year yield at the current level is a steal,” said Jason Simpson, a fixed- income strategist at Royal Bank of Scotland Group Plc in London. “The market is expecting aggressive rate cuts ahead and that should support the front end of the market.”

Gilts beat their European counterparts this month, handing investors a 5 percent return, compared with a gain of 3.8 percent on German bonds, according to Merrill Lynch & Co. U.K. Gilts and German Federal Governments indexes.

The looming recession in the U.K. caused to investors to raise bets on deflation in the past month. The five-year breakeven rate, a gauge of inflation expectations as measured by the difference in yield between regular bonds and index-linked debt, was minus 91 basis points today, compared with a positive 105 basis points at the start of November.

The economic pessimism is “overdone,” leaving the securities at “attractive levels,” Steve Major, HSBC Holdings Plc’s head of fixed-income strategy in London, wrote in a note to clients received by e-mail yesterday. “At some stage, the market will look beyond the deflation discounted for 2009 and to the risks of rising inflation by 2010-11.”

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

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Canadian Currency Depreciates on the Outlook for Global Growth

By Chris Fournier

Nov. 28 (Bloomberg) -- Canada’s currency weakened as commodities, European stocks and U.S. equity-index futures fell, reflecting concern that global economic growth will slow.

“Risk aversion is dominating trading, whether we look at equities or commodity-based currencies,” said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. “We can look at oil prices and all the other commodities declining and that’s adding some weight.”

The Canadian dollar weakened as much as 1 percent to C$1.2436 per U.S. dollar, from C$1.2316 yesterday. It traded at C$1.2388 at 8:07 a.m. in Toronto. One Canadian dollar buys 80.71 U.S. cents.

Canada’s dollar, dubbed the loonie for the aquatic bird on the one-dollar coin, is poised for its sixth straight monthly drop, the longest losing streak in 15 years.

Oil dropped below $50 a barrel last week, after reaching a record $147.27 in July. Crude accounts for 21 percent of the Bank of Canada’s Commodity Price Index, the largest single component. It dropped 1.3 percent today to $53.71.

The MSCI World Index declined 0.4 percent to 881.32. The gauge of stocks in 23 developed nations is headed for a decline of 7.9 percent in November.

Political uncertainty is also weighing on Canada’s currency, according to Strauss. Promises by the country’s opposition parties to fight Prime Minister Stephen Harper’s proposed spending cuts may bring down the minority Conservative Party government.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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